lundi 15 septembre 2014

Tax transparency: when PwC has a finger in every pie

Do you know CBCR? The acronym hides a new public tool aimed at ensuring that multinational corporations reveal how much tax they pay in every country they work in. It's no little matter: while we all know that big business manages to shrink corporate tax bills to around 10% or less, very little information is available on the amounts paid to each and every country. Understandable as it is that taxpayers’ personal information should remain confidential, the current level of opacity can no longer be warranted. Multinational companies play an important role in the lives of globalized workers/consumers. Knowing how much tax they pay, and where, should be as natural as being informed about government expenditure. Hence the interest of CBCR, the so-called country by country reporting. This new standard will soon oblige companies to divulge, for every country where they do business, taxes paid and subsidies received. Back in 2003, it was initially proposed by a British accountant named Richard Murphy, a close ally of the tax justice movement, and has since come a long way. It has now emerged from the small activists circles and is on the verge of becoming an internationally acknowledged norm - to the delight of its instigator (see here).
The EU and USA have already enforced it for extractive industries. Since these dig and pump in the core of countries, including numerous developing states, it’s only natural that their citizens should know how much they get in return in the form of tax, so goes the logic. From 2016 or 2017 onwards, mining and logging companies will have to start to publish CBC reports.
But why stop there? Couldn’t CBCR be imposed on all multinational corporations? EU heads of state and government seemed to think so in May 2013, when they issued a call for such transparency after a summit dedicated to tax avoidance. Unfortunately, as I have reported on this blog, the file has been discretely shelved, courtesy of German and British lobbying.
Another sector, however, has been deemed ripe for CBCR: the banking sector.
A recent EU directive on capital requirements obliges banks to publish a certain amount of information country by country (taxes, but also turnover, number of employees, etc.). In the current climate of hostility towards financial industries, lobbyists have only succeeded in ensuring that this new requirement is evaluated (and possibly amended) by the European Commission.
Harmless? Pay attention to the small print. The Commission has just decided that it won’t carry out the evaluation itself, but rather contract the audit firm PriceWaterhouseCoopers. The reason for this is that it lacks the staff to conduct the investigation itself. The one person in charge of corporate reporting just cannot measure the impact on the entire financial sector by himself. But there is a trick: PwC is far - very far indeed – from offering the independence one might expect on the topic. The firm is itself very actively promoting aggressive tax avoidance (as I have documented in chapter 7 of my book) In Belgium, the local branch supports the Tax Freedom Day, an anti-tax lobbying tool designed by a right-wing think tank in the United States. Interestingly, PwC has lobbied against the very CBCR it has been mandated to evaluate. On behalf of 14 multinational companies, the audit firm has pushed the OECD to limit the transparency of its own CBCR standard. The information, so PwC has argued, should be exchanged only between tax administrations, and not disclosed to the public (see here, page 147 onwards). In other words, PwC is being asked to give its opinions on a measure it has lobbied against on behalf of its clients. The conflict of interest couldn’t be clearer.
But how can this be surprising? For years now, big audit firms have managed to find a cozy spot in the middle of the international fiscal debate, on the one hand advising governments on designing taxes, and on the other helping companies to avoid them.
Just recently, the Australian presidency of the G20 accepted sponsorship totalling at least 300.000 US dollars from three global accounting firms in exchange for seats at a high-powered G20 summit on countering corporate tax dodging.
While just another example among many other cases of role confusion, it illustrates how audit firms succeed in capturing the attention of world leaders. Again, it’s no little matter, when you know how little they like the global clampdown on tax avoidance carried out by the G20 and the OECD since the financial crisis (see here).

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